Burma's insatiable state

Asian Survey

Volumn 48, Issue 6, 2008, Pages 958-976

  Turnell, Sean ^a  

^a MACQUARIE UNIVERSITY   (Australia)

Author keywords

Burma; Economy; Financial systems; Public finance; Resource revenues

Indexed keywords

ECONOMIC DEVELOPMENT; ENERGY MARKET; EXPORT; FINANCIAL MARKET; FINANCIAL SYSTEM; FISCAL REFORM; NATURAL GAS;

ASIA; EURASIA; MYANMAR; SOUTHEAST ASIA;

EID: 58249088877     PISSN: 00044687     EISSN: 1533838X     Source Type: Journal    
DOI: 10.1525/as.2008.48.6.958     Document Type: Article

References (61)

1. The label "Burma" is employed throughout this paper in preference to "Myanmar." Though this is highly contested terrain, the former label is less obviously associated with the country's dominant ethnic group, and arguably more commonly employed in the commercial context.
2. See, for instance, Marie Lall, "Indo-Myanmar Relations in the Era of Pipeline Diplomacy," Contemporary Southeast Asia 28:3 (December 2006), pp. 424-46
3. and Zhang Xuegang, "Southeast Asia and Energy: Gateway to Stability," China Security 3:2 (Spring 2007), pp. 18-35.
4. British Petroleum, BP Statistical Review of World Energy, June 2007 , accessed July 7, 2007.
5. For more on the background to the development of these fields, and Burma's energy policies more generally, see Tin Maung Maung Than, "Myanmar's Energy Sector: Banking on Natural Gas," in Chin Kin Wah and Daljit Singh (eds.), Southeast Asian Affairs 2005 (Singapore: Institute of Southeast Asian Studies, 2005), pp. 257-92.
6. Ibid., p. 265.
7. At present Burma is the target of formal economic sanctions imposed by a number of countries, most significantly the United States and the European Union. Enterprises engaged in Burma are also subject to consumer boycott calls in these and other countries. In the wake of the crackdown against protestors in September/October 2007, both Total and Chevron (which acquired Unocal and its interest in Burma in 2005) have come under increasing formal and informal pressure to divest. The "sanctions debate" surrounding Burma is highly contentious and rather beyond the scope of this paper. For more, however, see Sean Turnell, "Burma's Economic Prospects," U.S. Senate Foreign Relations Committee, U.S.-Burma Relations, One Hundred and Ninth Congress, March 29, 2006, , accessed November 5, 2007.
8. Burma's trade statistics suffer from the general unreliability of data in Burma, but the situation is exacerbated here by the under-reporting of imports in order to avoid customs duties. These latest numbers derive from the Myanmar Central Statistical Organization and were reported by Ye Lwin and Kyaw Thu, "Government Dominates Foreign Trade as Gas Sales Pump Up Exports," Myanmar Times, June 4-10,2007, .
9. Ibid.
10. The prices listed in Table 1 are a composite of those applying to the delivery of natural gas to a number of countries and regions. Gas export prices are typically quoted in "British Thermal Units" (Btus), a measure that accounts for both volume and energy intensity. Though there are other complications that must be taken into account in particular contexts, one Btu is equivalent to approximately 28 million cubic meters of gas.
11. Estimates of the size of the Shwe fields vary, but those here refer to confirmed gas reserves according to British Petroleum's BP Statistical Review of World Energy.
12. See also the Economist Intelligence Unit (EIU), Myanmar (Burma) Country Report May 2007 (EIU: London, 2007), p. 22.
13. EIU, Myanmar (Burma), Country Profile 2006 (EIU: London, 2006), pp. 22-23.
14. Anupama Airy, "Myanmar Prefers China as Gas Buyer," Financial Express, May 29, 2007, .
15. "Daewoo, Partners Make Gas Strike Off Myanmar," Oil and Gas Journal Online, June 23, 2006, .
16. "India, Myanmar Sign Gas Supply Deal," Economic Times, March 10, 2006, .
17. EIU, Myanmar (Burma) Country Report May 2007, p. 22.
18. Ibid. PTTE acknowledges a likely 70 billion cubic meters.
19. Asian Development Bank (ADB), Asian Development Outlook 2007 (Manila: ADB, 2007), p. 220.
20. EIU, Myanmar (Burma), Country Profile 2006, p. 22.
21. Ardeth Maung Thawnghmung and Maung Aung Myoe, "Myanmar in 2006: Another Year of Housekeeping?" Asian Survey 47:1 (January/February 2007), pp. 194-99.
22. EIU, Myanmar (Burma), Country Report July 2007, p. 3.
23. Vito Tanzi and Howell Zee, Tax Policy for Developing Countries (Washington, D.C.: IMF, 2001), p. 3.
24. Such an estimate is likewise consistent with that of the ADB, Asian Development Outlook 2007, p. 221.
25. CIA, CIA World Factbook, , accessed July 21, 2007.
26. EIU, Myanmar (Burma), Country Profile 2006, p. 21.
27. United Nation's Development Program, Human Development Report 2006 , accessed June 29, 2007.
28. Ibid.
29. EIU, Myanmar (Burma), Country Report July 2007, p. 6.
30. Ye Lwin and Kyaw Thu, "Government Dominates Foreign Trade as Gas Sales Pump Up Exports," Myanmar Times, June 4-10, 2007, .
31. For more on the regulations distorting the functions of banks in Burma, see Sean Turnell, "Profiles of Burma's Banks," Burma Economic Watch 1:06 (2006), pp. 3-33.
32. In June 2007, the essentially moribund state of Burma's banks was underlined by an announcement from the central bank that places limits on the amount of deposits that banks can accept. The imposition of these limits, stipulating a ceiling on new deposits of K 3 million per customer, per week, is an implicit recognition that the banks can find few profitable lending opportunities. See Shah Paung, "Burma's Private Banks Limit Deposits to Stay Alive," The Irrawaddy, July 26, 2007, .
33. For a comprehensive analysis of Burma's 2003 financial crisis, see Sean Turnell, "Myanmar's Banking Crisis," pp. 272-82.
34. These interviews were conducted by the author across 2006-07 in the United States, Singapore, and Thailand, as well as in Burma itself (remotely, via various secure channels). See also May Thander Win, "Banks Claim a Solid Recovery," Myanmar Times, July 31 - August 6, 2006, .
35. This assertion is based on interviews with borrowers from the banks by the author.
36. Many of these leaders were those who had made ceasefi re agreements between the groups they represented, and the SLORC/SPDC. For more, see Bruce Hawke, "Burmese Banking: The Yangon Laundromats Burnout Explained," The Irrawaddy 12:4 (April 2004), pp. 17-21.
37. One of the most damaging issues surrounding Burma's banks are the widespread accusations that they are engaged in laundering the substantial money generated through Burma's narcotics trade. For more on this, see Sean Turnell, "Burma's Economic Prospects," pp. 14-16.
38. This survey was conducted by Fumiharu Mieno, "Determinants of Debt, Bank Loan, and Trade Credit of Private Firms in the Transitional Period: The Case of Myanmar," in Mariko Watanabe (ed.), Recovering Financial Systems: China and Asian Transition Economies (Basingstoke: Palgrave Macmillan, 2006), pp. 146-76.
39. See also Myat Thein, Economic Development of Myanmar (Singapore: Institute of Southeast Asian Studies, 2004), p. 143.
40. Stephen Brookes, "Black Market Banking in Burma," Asia Times, April 18, 2006, .
41. Food and Agriculture Organization of the United Nations (FAO), "Myanmar: Agricultural Sector Review and Investment Strategy," Working Paper, no. 9, Rural Finance (Rome: FAO, 2004), p. 3.
42. Ibid., p. 6.
43. Ibid., p. 25.
44. Ibid., p. 2.
45. Covariant risk in this context refers to the situation in which all borrowers face circumstances that may inhibit their ability to repay their loans. Agricultural lending is especially susceptible to covariant risk because seasonal factors tend to have an impact upon all borrowers simultaneously. Ibid., p. 5.
46. Ibid., p. 10.
47. Bank for Agriculture and Agricultural Cooperatives, , accessed July 3, 2007.
48. Myat Thein, Economic Development of Myanmar (Singapore: Institute of Southeast Asian Studies, 2004), p. 143.
49. Debbie Aung Din Taylor, "Signs of Distress: Observations on Agriculture, Poverty, and the Environment in Myanmar," Conference on Burma: Reconciliation in Myanmar and the Crises of Change (Washington, D.C.: School of Advanced International Affairs, Johns Hopkins University, November 22, 2002), p. 22.
50. The first example of a resources curse was probably that flowing from the negative effects on 16th-century Spain of the influx of precious metals from the New World. The modern label for the phenomenon seems to have its origins in Richard Auty's Sustaining Development in Mineral Economies: The Resource Curse Thesis (London: Routledge, 1993).
51. Burma was recently judged by Transparency International as the second-most corrupt country in the world (bested only by Somalia), see . As noted above, however, the notion of a resources curse extends beyond simple corruption, to include the broader distortions wrought generally by windfall gains.
52. Consulting astrologers, soothsayers, and numerologists before making major decisions is common among ordinary Burmese, but it has become a particular habit of the chairman of the SPDC, Senior General Than Shwe. According to the rumor mill, it was Than Shwe's astrologer who was decisive in the move to Naypyitaw, advising the general that Rangoon faced natural disaster and would become a source of political unrest. For a comprehensive summary of the reporting of the move, and the speculation on what was behind it, see Kate McGeown, "Burma's Confusion over Capital," BBC News, , accessed July 9, 2007.
53. Ibid.
54. The ADB simply says that the expenditure on Naypyitaw will offset whatever advances are being made in Burma in raising more tax revenue. ADB, Asian Development Outlook 2007, p. 220.
55. Such "new" capitals include Brasilia (Brazil), Canberra (Australia), Ottawa (Canada), and, perhaps most pertinently for Burma, Abuja (Nigeria).
56. Ardeth Maung Thawnghmung and Maung Aung Myoe, "Myanmar in 2006: Another Year of Housekeeping?" p. 197.
57. The following is but a brief sketch of this controversial project, for which no better source exists than Andrew Selth's, "Burma and Nuclear Proliferation: Policies and Perceptions," Griffith Regional Outlook Paper, no. 12 (Brisbane: Griffith University, June 2007).
58. The source was Atomstroieksport, the agency overseeing Russia's international nuclear-energy deals. See William Boot, "Nuclear Center to Cost $540 million, but Who Pays?" The Irrawaddy, June 1, 2007, .
59. For an excellent introduction to stabilization funds, see Jeffrey Davis, "Oil Funds: Problems Posing as Solutions," Finance and Development 38:4 (December 2001), .
60. See, for instance, Thomas Palley, "Combating the Natural Resource Curse with Citizen Revenue Distribution Funds: Oil and the Case of Iraq," Foreign Policy in Focus, Discussion Papers (May 2002), , accessed August 2, 2007. Details of the Alaskan scheme, the "Alaska Permanent Fund Corporation," can be found at its official website, .
61. Democracy, the rule of law, transparency, and accountability in government decision making - surrounded and stimulated by a free press - are other "institutions" with proven efficacy in inhibiting the ill effects of a resources curse. Their establishment in Burma is, alas, rather less likely at the moment than the creation of a device such as an RDF.